Community Reinvestment Act

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The Community Reinvestment Act is a United States federal law passed in 1977 by the 95th US Congress. One of its most-noted effects is that of making it easier for borrowers in less-affluent neighborhoods to obtain loans, especially mortgages. This is often cited as one of the causes of the 2008 mortgage crisis, although the only evidence so far in support of this conclusion is in a paper that is unavailable to the public.

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  • 2012-12-20 New Study Finds CRA 'Clearly' Did Lead To Risky Lending "a new study by the respected National Bureau of Economic Research [W] finds, "Yes, it did. We find that adherence to that act led to riskier lending by banks. [...] There is a clear pattern of increased defaults for loans made by these banks in quarters around the (CRA) exam. Moreover, the effects are larger for loans made within CRA tracts," or predominantly low-income and minority areas." The paper, unfortunately, costs $5.
  • 2011-08-03 The Subprime Crisis: Is Government Housing Policy to Blame?: "We find little evidence that either the CRA or the GSE goals played a significant role in the subprime crisis. Our lender tests indicate that areas disproportionately served by lenders covered by the CRA experienced lower delinquency rates and less risky lending. Similarly, the threshold tests show no evidence that either program had a significantly negative effect on outcomes."
  • 2008-09-29 Community Reinvestment Act had nothing to do with subprime crisis: "Fresh off the false and politicized attack on Fannie Mae and Freddie Mac, today we're hearing the know-nothings blame the subprime crisis on the Community Reinvestment Act – a 30-year-old law that was actually weakened by the Bush administration just as the worst lending wave began. This is even more ridiculous than blaming Freddie and Fannie."